Assessment of potential carbon leakage in the third and fourth trading phase of EU Emissions Trading System

The objective of the study was to 1) investigate whether there is evidence of carbon leakage in the third trading phase of the EU ETS as a result of carbon pricing, and 2) provide evidence on whether the sectors assessed could be more or less challenged and exposed to carbon leakage in the fourth trading phase in a scenario of increased climate change ambition in the EU. The study provided a retrospective assessment of the evidence for carbon leakage during the third trading period of the EU ETS based on available datasets to derive indicators presented in a series of sector fact sheets. The expected impact on future carbon leakage risks was also assessed, focusing on the potential carbon costs that would be incurred by the sectors studied, as well as mitigation potentials. The study also examined options to prevent carbon leakage (i.e. reforms to the free allocation mechanism).